Hotel floats on horizon
Singapore hotel owners who control more than $1 billion of Australian property are positioning to launch real estate investment trusts that will be supported by the local sector's strong performance.
Frasers Hospitality, which owns and operates a portfolio of hotels around the world, including a major presence in Australia, is preparing to spin off a trust on the Singapore stock exchange.
Singapore-based tycoon Michael Kum is also positioning his portfolio to attract investors and has emphasised the long-term out-performance of hotels against other property sectors.
Mr Kum's M&L Hospitality, which owns the nation's largest hotel, the 683-room Four Points by Sheraton in Sydney's Darling Harbour, as well as a string of city hotels in Sydney and Melbourne, is considered a float candidate on either the Australian Securities Exchange or the Singapore bourse.
M&L chief executive Neil Maxwell said people did not give sufficient credit to the performance of hotels, partly due to their chequered history in the 1980s and 90s when there was over-supply in a number of Australian cities.
M&L Hospitality chairman Michael Kum with NSW Deputy Premier Andrew Stoner during a recent visit to Sydney.
"Hotels generally have performed very well since the start of 2000 onwards," he said. Although M&L picked up the hotel during a trough in values, Mr Maxwell noted the Four Points by Sheraton had operated at 78 per cent occupancy even during the GFC.
M&L Group executive director Jocelyn Kum played down the prospect of a quick float. Local equity markets have absorbed a series of property raising and corporate activity is running hot.
"If there is anything we'll have a look at it next year," Ms Kum said. "For us, the key is to continue to grow the portfolio."
M&L is pouring capital into a string of refurbishments. "The growth of the group is not limited to an IPO exercise or a fund raising exercise," Ms Kum said.
The executives declined to be drawn about the purchase of a prime development site at Melbourne's Freshwater Place from Australand Property Group for $31 million.
Mr Kum, whose personal wealth is estimated at $750m by Forbes, is understood to be planning a five-star hotel and apartment complex with a potential end value of between $300m and $500m on the Southbank site.
Ms Kum noted the trend for more mixed use developments in Australia. However, she emphasised the group had no intention of being involved with casino developments.
Ms Kum noted the rising influence of hotel buyers from China. She argued that the yield compression driven by these players would be good for all hotel owners. She said buyers were ultimately driven by the kind of income that hotels generated.
A move by Frasers Hospitality could come ahead of the Kum family, which has previously tried to tap the Singapore market.
The group's holdings in Australia include three established properties. The largest, the Fraser Suites Perth, has 236 serviced rooms. The Fraser Suites Sydney comprises 201 apartments and the Fraser Place Melbourne has 112 apartments.
Frasers Hospitality operates as a subsidiary of Singapore's Fraser and Neave, which Thai billionaire Charoen Sirivadhanabhakdi won control of this year after a takeover battle against OUE.
The Wall Street Journal said he plans to pare his majority stake in Fraser & Neave to keep the Singapore-based conglomerate listed and allow it to spin off property assets. This would see the group's property arm Frasers Centrepoint spun off by the end of this year, the paper said.
Mr Charoen was also considering an initial public offering of Fraser & Neave's hospitality assets that could see the group raise about $US1bn and will probably be held early next year.
